1.2.4 The Role of Uncertainty

The uncertainties that surround climate change are vast. The connections between
emissions of GHGs and climate change are not fully understood. In addition,
uncertainty distorts our understanding of the impacts of climate change and
the value of those impacts to humans. These uncertainties depend on scale, and
become larger across the spectrum from average impacts across broadly
defined geographical areas to specific impacts felt at a more local level.

The uncertainties that surround climate change bear on the issue of whether
mitigation policies are justified. Some analysts might conclude that these uncertainties
justify the postponement of significant mitigation effortsparticularly
those that involve economic sacrificeson the grounds that not enough is
yet known about the problem. Proponents of this point of view argue that there
is some chance that scientific inquiry will eventually reveal that the continued
accumulation of GHGs will not produce significant changes in climate and/or
significant associated damages. So long as the possibility exists that a type
one error (an action that will ultimately turn out to be unnecessary)
could occur, the argument goes, it is premature to undertake costly mitigation
measures now.

However, uncertainty also introduces the risk that the opposite will occur.
There is a significant possibility that scientific investigations will ultimately
reveal that the continued accumulation of GHGs will have severe consequences
for climate and substantial associated impacts. If this scenario should materialize,
the cost of making this type two error (of taking little or no action
in the near term to stem the accumulation of GHGs) could be enormous. As discussed
in Chapters 8-10, it may be less costly to spread
the costs of averting climate change by beginning mitigation efforts early,
rather than to wait several decades and take actions after the problem has already
advanced much further. Indeed, if postponing mitigation efforts allows irreversible
climate impacts to occur, then no future efforts, at any cost, can undo the
resultant damage.

The risks of premature (or unnecessary) action should therefore be compared
with the risks of failing to take action that later proves warranted. As stated
in Article 3.3 of the Framework Convention  The
parties should take precautionary measures to anticipate, prevent or minimise
the causes of climate change and mitigate its adverse effects(UNFCCC,
1992). Which risk is larger? Analyses of this issue (see Chapter
10) tend to indicate that the latter risk is sufficient to justify some
mitigation efforts in the short run, despite the possibility that these efforts
might ultimately prove unnecessary. These analyses depict mitigation efforts
as a type of insurance against potentially serious future consequences. It is
generally sensible for a person to purchase fire insurance on his or her house
(despite the likelihood a fire will never occur). Likewise, it is rational for
nations to insure against potentially serious damages from climate change, despite
the significant chance that the most serious scenarios will not materialize.

The term precautionary principle has been employed to express the idea that
it may be appropriate to take actions to prevent potentially harmful climate-change
outcomes. As discussed in Chapter 10, this term has
more than one meaning. A weak version of the principle is the idea that, in
the presence of uncertainty, it may be prudent to engage in policies that provide
insurance against some of the potential damages from climate change. Insuring
against potentially serious damages can be rational simply because the costs
of the insurance are less than the expected value of avoided damages. This weaker
form of the precautionary principle applies even if individuals or societies
are not particularly averse to risk. In its stronger form, the precautionary
principle stipulates that nations should pursue whatever policies are necessary
to minimize the damages under the worst possible scenario. This stronger form
assumes extreme risk-aversion, since it focuses exclusively on the worst possible
outcomes. It is clear, though, that there are costs associated with climate
policies that could, under some circumstances, impose large costs on particular
peoples and/or nations; but neither form of the precautionary principle has
yet been applied to this side of the climate calculus.

Uncertainty also bears on the design of mitigation policies. As indicated in
Chapters 8 and 10, the problem
of climate change might be addressed most effectively through a process of sequential
decision making, in which policies are adjusted over time as new scientific
information becomes available and uncertainties are reduced. Moss and Schneider
(2000) offer guidance on how subjective probabilities can be utilized effectively
when empirical data are not available or are inconclusive. New information is
valuable, and flexible policies that can make use of this information have an
advantage over rigid ones that cannot. In any case, policies that help build
or strengthen mitigation capacity are consistent with the insurance approach.
To the extent that mitigation capacity is higher, the costs of future action
can be expected to be lower.